The art of controlling inflation

The stock markets continued their progress until the publication of the employment report in the United States at the end of January. The latter reported an increase in wages that pushed inflation upward.

For example, American rates at 10 years of age rose from 2.4% at the end of December to 2.7% at the end of January to 2.8% at present. At the same time, U.S. markets with a performance of + 5.6% in dollar terms at this start of the year (3% for Eurostoxx) lost their lead in 10 exchange sessions. This decline was amplified by the unlocking of sales positions on products investing in market volatility.

However, in this context, traditional indicators of stress such as gold or Swiss francs have little variation.

Moreover, the results publications and macroeconomic indicators remain very well oriented as the IMF revises the increase in European growth forecasts è 2.2% for 2018.

As long as inflation remains around 2% (the last digit published today è 2.1% in January in the United States in annual rhythm) with central banks still accommodating and responsive, we remain positive about the economic prospects for 2018.

Indeed, the catalysts remain solid:

In the United States, Donald Trump’s infrastructure program of 1 500 billion dollars over 10 years will not only benefit sectors such as construction or real estate but also for domestic growth in general.
American and European companies are showing a positive dynamic of their profits with 13% growth on average results in the United States.
The financial sector will benefit fully from the increase in rates during the year. Technological values, despite their high valuations, continue to show insolent growth rates in relation to those of the traditional economy.
The financial sector will benefit fully from the increase in rates during the year. Technological values, despite their high valuations, continue to show insolent growth rates in relation to those of the traditional economy.

However, some elements must be closely monitored:

The result of the Italian elections in the spring
The rate of increase in rates led by the FED must not hinder the growth of the
Global geopolitics remains subject in part to the tweets and moods of Mister Trump
As a result, the choice of titles becomes more decisive and can be sanctioned strongly with regard to the current high valuations.

We have made numerous arbitrations between different units of UCITS to benefit from a reduction in management costs during the creation of “Clean Share”. These new compartments were created by the management companies to meet the new MIF2 directive.

Both expected and fearful inflation is becoming an indicator that will focus investors ‘ eyes in the coming months. The right dosage is to be found and becomes the challenge of Jerome Powell, a new strong man with the joysticks of the American Central Bank.


DIDAY
Director of management under mandate

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